Will Algeria finally open up?
In our emerging markets series, we look at new franchise markets in Africa and Central Asia and discuss key issues faced by franchisors and franchisees in those markets.
Algeria has for some time been debating a franchise law. The Algerian Commercial Code does not currently regulate the "franchise agreement" as a recognised form of doing business in Algeria. There have been rumours over the last five years or so regarding plans by the Algerian Government to address this problem through the creation of a franchise law.
Why is a franchise law needed?
Without official recognition of franchising as a legally recognised form of doing business, franchisors encounter difficulty with payment of franchise fees and franchisees struggle to secure leases. The Bank of Algeria does not recognise the payment of franchise royalties and obtaining permission to pay a franchise fee from it can be difficult to obtain. Payment for product imports are possible and so for retail-based systems, there is a solution available. Instead of charging franchise fees, these systems charge an additional margin on the product supply. For a service-based franchise system however, the situation remains difficult. Permission to pay franchise fees is only available on a case-by-case basis and is often denied. It is expected that a franchise law would bring with it the official seal of approval for the payment of franchise fees that is needed to enable the industry to prosper in Algeria.
Franchising in Algeria
At this point a number of French franchisors, such as Yves Rocher and Carré Blanc, have entered the market. There is a growing appetite amongst Algerians for branded products and some brands have succeeded in opening a number of outlets in the country. Compared with its neighbour, Morocco, Algeria has a long way to go.